Rubén Castillo
Director General
Mejora
/
Insight

Working with Operators on Sustainable Closure

Sat, 10/28/2017 - 17:35

When a mine prepares for closure, the operator is faced with a number of challenges. A full remediation and reforestation plan must be drawn up to meet all environmental requirements, a strong project pipeline must be ready to replace the fall in production levels and revenue and the land must be returned to the original owner according to local protocol.

But there is one issue that could have particularly damaging effects if not handled correctly: how to ensure that thousands of workers, most of whom inevitably lose their jobs as a project winds down, are prepared for a future without the mine. While most operators do their best to offer their staff support via training schemes, workshops and recommendations, the sheer size of the redundant workforce means that the employer requires help to ensure that everyone receives the backing he or she needs.

Mejor is a San Luis Potosi-based nonprofit civil association that administers annual savings funds for workers across a variety of industries, is geared toward fostering a culture of saving and future planning in Mexico. For many years it has managed an annual savings fund – a collective savings account that is renewed every year – for workers at Minera San Xavier, which runs the Cerro San Pedro mine near the city of San Luis Potosi. The mine, owned by Canadian miner New Gold, is now in a final leaching program, with full closure expected to arrive in 2019 at the latest. Mejora is helping the workers take the next step in their careers.

“Many of the workers have shown interest in starting their own business,” says Ruben Castillo, Director General of Mejora. “We help to connect them to the right people and our support will not stop, despite the fact that the annual savings fund is coming to an end.”

As well as supporting workers faced with redundancy, Mejora, which has been in operation since 2004 and now has over 45,000 members, tries to encourage workers to save by offering a unique investment platform. The annual savings fund allows workers from any company to invest a portion of their wages into a collective account over a period of 10 months. The account is opened in January and the savings are then shared out between the members the following November, although funds can be withdrawn at any point during the year. Workers can then hand out taxfree loans to each other at far more competitive rates than would be on offer on the market at conventional microfinance institutions. “This gives the client more flexibility, which is important for workers in Mexico who often need cash at short notice,” says Castillo. “It makes it much easier and more attractive to save and take out loans.”

This short-term model was designed by Mejora specifically for the Mexican market. Castillo accepts that microfinance is a “fantastic tool” for developing economies like Mexico but insists that the lack of financial awareness in the country makes this method of lending risky for the local working population. “If there is no basic financial education microfinance can cause socioeconomic problems because people do not understand the small print when taking out loans and so the interest can snowball out of control,” he says. “Taking the money directly from the salary removes the danger of failure to pay the installments on time, which is a problem we continue to see in Mexico.”

Although Mejora does not gear itself toward any particular industry, the annual saving fund platform is particularly attractive to miners, whose wages are higher on average than other sectors in Mexico. From its base in San Luis Potosi, the company is growing at a considerable rate and already has operations in Tabasco, Guanajuato and Jalisco. Mejora now works with over 70 companies, including Dräxlmaier, General Motors and Faurecia, to encourage its workforce to start saving. By doing so, says Castillo, the company hopes to see workers in Mexico better prepared for the uncertainties of the future.

“Our business model revolves around encouraging people to save and to do this we work with companies to teach personal finance, investment and future planning,” he says. “There is a significant lack of financial awareness and education in Mexico and we are trying to fill that gap.”